[Federal Register: October 22, 2004 (Volume 69, Number 204)]
[Proposed Rules]
[Page 62008-62012]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
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DEPARTMENT OF EDUCATION
34 CFR Part 225
RIN 1855-AA02
Credit Enhancement for Charter School Facilities Program
AGENCY: Office of Innovation and Improvement, Department of Education.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Secretary issues these proposed regulations to administer
the Credit Enhancement for Charter School Facilities program and its
predecessor, the Charter School Facilities Financing Demonstration
Grant program. Under this program, the Department provides competitive
grants to entities that are non-profit or public or are consortia of
these entities to demonstrate innovative credit enhancement strategies
to assist charter schools in acquiring, constructing, and renovating
facilities through loans, bonds, other debt instruments, or leases.
DATES: We must receive your comments on or before November 22, 2004.
ADDRESSES: Address all comments about these proposed regulations to Jim
Houser, U.S. Department of Education, 400 Maryland Avenue, SW.,
Washington, DC 20202-6140. If you prefer to send comments through the
Internet, use the following address: comments@ed.gov. You must include
the term ``credit enhancement'' in the subject line of your electronic
message.
If you want to comment on the information collection requirements,
you must send your comments to the Office of Management and Budget at
the address listed in the Paperwork Reduction Act section of this
preamble. You may also send a copy of these comments to the Department
representative named in this section.
FOR FURTHER INFORMATION CONTACT: Valarie Perkins or Jim Houser, U.S.
Department of Education, 400 Maryland Avenue, SW., Washington, DC
20202-6140. Telephone: (202) 260-1924 or via Internet, at:
charter.facilities@ed.gov. If
[[Page 62009]]
you use a telecommunications device for the deaf (TDD), you may call
the Federal Information Relay Service (FIRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact person listed under FOR FURTHER
INFORMATION CONTACT.
SUPPLEMENTARY INFORMATION:
Invitation To Comment
We invite you to submit comments regarding these proposed
regulations. To ensure that your comments have maximum effect in
developing the final regulations, we urge you to identify clearly the
specific section or sections of the proposed regulations that each of
your comments addresses and to arrange your comments in the same order
as the proposed regulations.
We also invite you to assist us in complying with the specific
requirements of Executive Order 12866 and its overall requirement of
reducing regulatory burden that might result from these proposed
regulations. Please let us know of any further opportunities we should
take to reduce potential costs or increase potential benefits while
preserving the effective and efficient administration of the program.
During and after the comment period, you may inspect all public
comments about these proposed regulations in room 4W258, 400 Maryland
Avenue, SW., Washington, DC, 20202-6140, between the hours of 8:30 a.m.
and 4 p.m., Eastern time, Monday through Friday of each week except
Federal holidays.
Assistance to Individuals With Disabilities in Reviewing the Rulemaking
Record
On request, we will supply an appropriate aid, such as a reader or
print magnifier, to an individual with a disability who needs
assistance to review the comments or other documents in the public
rulemaking record for these proposed regulations. If you want to
schedule an appointment for this type of aid, please contact the person
listed under FOR FURTHER INFORMATION CONTACT.
Background
These proposed regulations would apply to both (a) the Credit
Enhancement for Charter School Facilities program, which is authorized
under title V, part B, subpart 2 of the Elementary and Secondary
Education Act of 1965 (the Act), as amended by the No Child Left Behind
Act of 2001 (Pub. L. 107-110, enacted January 8, 2002) and (b) its
predecessor, the Charter School Facilities Financing Demonstration
Grant program, as authorized by title X, part C, subpart 2 of the Act
as part of the Department of Education Appropriations Act, 2001 as
enacted by the Consolidated Appropriations Act, 2001. The purpose of
this program is to assist charter schools in meeting their facilities
needs. Under this program, funds are provided on a competitive basis to
public and nonprofit entities, and consortia of these entities, to
leverage other funds and help charter schools acquire school facilities
through such means as purchase, lease, and donation. Grantees may also
use grants to leverage other funds to help charter schools construct
and renovate school facilities.
To help leverage funds for charter school facilities, grant
recipients may, among other things: Guarantee and insure debt,
including bonds, to finance charter school facilities; guarantee and
insure leases for personal and real property; facilitate a charter
school's facilities financing by identifying potential lending sources,
encouraging private lending, and carrying out other, similar
activities; and establish temporary charter school facilities that new
charter schools may use until they can acquire a facility on their own.
Sections in these proposed regulations that govern the management
of grants would apply to grants under both the Credit Enhancement for
Charter School Facilities program and its predecessor, the Charter
School Facilities Financing Demonstration Grant program. These two
programs are virtually identical and grants made under them will
operate for several years. Sections related to grantee selection would
apply only to grant competitions conducted after fiscal year (FY) 2004.
Proposed Regulations
The primary purpose of this regulation is to establish selection
criteria for this complex program's discretionary grant competitions
after FY 2004. Since we seek to award grants to high-quality applicants
with high-quality plans to use their grant funds, these criteria
essentially include assessments on the quality of the applicant and the
quality of the applicant's plan. The criteria also assess how
applicants propose to leverage private or public sector funding and
increase the number and variety of charter schools assisted in meeting
their facilities needs. The proposed selection criteria are similar to
those we have used in the two previous competitions for this program.
As noted above, this proposed regulation also includes a few provisions
that govern the ongoing management of the grants already awarded in
preceding fiscal years.
Executive Order 12866
1. Potential Costs and Benefits
Under Executive Order 12866, we have assessed the potential costs
and benefits of this regulatory action.
The potential costs associated with the proposed regulations are
those resulting from statutory requirements and those we have
determined to be necessary for administering this program effectively
and efficiently. Elsewhere in this SUPPLEMENTARY INFORMATION section we
identify and explain burdens specifically associated with information
collection requirements. See the heading Paperwork Reduction Act of
1995.
In assessing the potential costs and benefits--both quantitative
and qualitative--of this regulatory action, we have determined that the
benefits would justify the costs.
We have also determined that this regulatory action would not
unduly interfere with State, local, and tribal governments in the
exercise of their governmental functions.
Summary of Potential Costs and Benefits
The Secretary believes that these regulations are necessary to
clarify complex statutory provisions. As noted elsewhere, these
proposed regulations add clarity where the statute is ambiguous or
reorganize statutory material to facilitate a better understanding of
the statute's requirements. Nearly all of the benefits and costs of
these proposed regulations stem from the underlying legislation and not
the regulations. The costs associated with these proposed regulations
are not only minimal but are also justified in terms of the benefits
that successful applicants for these discretionary grants will receive.
For example, the statute requires an application and the types of
information that would be collected through the proposed selection
criteria should be readily available to applicants under this program.
2. Clarity of the Regulations
Executive Order 12866 and the Presidential memorandum on ``Plain
Language in Government Writing'' require each agency to write
regulations that are easy to understand.
The Secretary invites comments on how to make these proposed
regulations
[[Page 62010]]
easier to understand, including answers to questions such as the
following:
[cir] Are the requirements in the proposed regulations clearly
stated?
[cir] Do the proposed regulations contain technical terms or other
wording that interferes with their clarity?
[cir] Does the format of the proposed regulations (grouping and
order of sections, use of headings, paragraphing, etc.) aid or reduce
their clarity?
[cir] Would the proposed regulations be easier to understand if we
divided them into more (but shorter) sections? (A ``section'' is
preceded by the symbol ``Sec. '' and a numbered heading; for example,
Sec. 225.1 What is the Credit Enhancement for Charter School
Facilities Program?)
[cir] Could the description of the proposed regulations in the
``Supplementary Information'' section of this preamble be more helpful
in making the proposed regulations easier to understand? If so, how?
[cir] What else could we do to make the proposed regulations easier
to understand?
Send any comments that concern how the Department could make these
proposed regulations easier to understand to the person listed in the
ADDRESSES section of the preamble.
Regulatory Flexibility Act Certification
The Secretary certifies that these proposed regulations would not
have a significant economic impact on a substantial number of small
entities. The small entities that would be tangentially affected by
these proposed regulations are small grantees and, tangentially, small
charter schools that ultimately benefit from services provided by
grantees. In addition, we do not believe that the regulations would
have a significant economic impact on the limited number of small
grantees and small charter schools affected because the proposed
regulations would not impose excessive regulatory burdens on those
entities or require unnecessary Federal supervision.
The proposed regulations would benefit both small and large
entities in that they clarify confusing and complex statutory
requirements. Also, since the statute requires Credit Enhancement for
Charter School Facilities applicants to apply to the Department if they
wish to receive discretionary funds, it would be difficult for the
Department to award funds without the application information specified
in the proposed regulations. The proposed regulations will ensure that
applicants do not provide significant amounts of information that is
already otherwise available to the Department.
The proposed regulations would impose minimal paperwork burden
requirements for all applicants and minimal requirements with which
grant recipients must comply. However, the Secretary specifically
invites comments on the effects of the proposed regulations on small
entities, and on whether there may be further opportunities to reduce
any potential adverse impact or increase potential benefits resulting
from these proposed regulations without impeding the effective and
efficient administration of the Credit Enhancement for Charter School
Facilities program.
Paperwork Reduction Act of 1995
Sections 225.11 and 225.12 contain information collection
requirements. Under the Paperwork Reduction Act of 1995 (44 U.S.C.
3507(d)), the Department of Education submitted a copy of this section
to the Office of Management and Budget (OMB) for its review.
Collection of Information: Credit Enhancement for Charter School
Facilities Grant Program
The Department will use the information collected through the
selection criteria and competitive priority to determine whether to
fund applicants. Since the statute requires applicants to apply for
funds, the Department would not be able to award these funds without
the application to collect the required information.
We estimate the annual reporting and recordkeeping burden for this
collection of information to average 80 hours for each respondent for
30 applicants, including the time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Thus, we
estimate the total annual reporting and recordkeeping burden for this
collection to be 2400 hours.
If you want to comment on the information collection requirements,
please send your comments to the Office of Information and Regulatory
Affairs, OMB, room 10235, New Executive Office Building, Washington, DC
20503; Attention: Desk Officer for U.S. Department of Education. You
may also send a copy of these comments to the Department representative
named in the ADDRESSES section of this preamble.
We consider your comments on this proposed collection of
information in--
[cir] Deciding whether the proposed collection is necessary for the
proper performance of our functions, including whether the information
will have practical use;
[cir] Evaluating the accuracy of our estimate of the burden of the
proposed collection, including the validity of our methodology and
assumptions;
[cir] Enhancing the quality, usefulness, and clarity of the
information we collect; and
[cir] Minimizing the burden on those who must respond. This
includes exploring the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology; e.g., permitting electronic submission of
responses.
OMB is required to make a decision concerning the collection of
information contained in these proposed regulations between 30 and 60
days after publication of this document in the Federal Register.
Therefore, to ensure that OMB gives your comments full consideration,
it is important that OMB receives the comments within 30 days of
publication. This does not affect the deadline for your comments to us
on the proposed regulations.
The proposed regulations would benefit both small and large
entities in that they clarify confusing and complex statutory
requirements. However, the Secretary specifically invites comments on
the effects of the proposed regulations on small entities, and on
whether there may be further opportunities to reduce any potential
adverse impact or increase potential benefits resulting from these
proposed regulations without impeding the effective and efficient
administration of the Credit Enhancement for Charter School Facilities
program.
Commenters are requested to describe the nature of any effect and
provide empirical data and other factual support for their views to the
extent possible. These comments will be placed in the public comment
file and considered in the preparation of the final regulations.
Intergovernmental Review
This program is subject to Executive Order 12372 and the
regulations in 34 CFR part 79. One of the objectives of the Executive
order is to foster an intergovernmental partnership and a strengthened
federalism. The Executive order relies on processes developed by State
and local governments for coordination and review of proposed Federal
financial assistance.
This document provides early notification of our specific plans and
actions for this program.
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Electronic Access to This Document
You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at the following site:
http://www.ed.gov/news/fedregister.
To use PDF you must have Adobe Acrobat Reader, which is available
free at this site. If you have questions about using PDF, call the U.S.
Government Printing Office (GPO), toll free, at 1-888-293-6498; or in
the Washington, DC, area at (202) 512-1530.
You may also view this document in PDF at the following site:
http://www.ed.gov/programs/charterfacilities/index.html.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at:
http://www.gpoaccess.gov/nara/index.html
.
(Catalog of Federal Domestic Assistance Number 84.354A Credit
Enhancement for Charter School Facilities Program.)
List of Subjects in 34 CFR Part 225
Charter Schools, Credit Enhancement, Education, Educational
facilities, Elementary and secondary education, Grant programs--
education, Report and recordkeeping requirements, Schools.
Dated: October 19, 2004.
Nina Shokraii Rees,
Assistant Deputy Secretary for Innovation and Improvement.
For the reasons discussed in the preamble, the Secretary proposes
to amend title 34 of the Code of Federal Regulations by adding a new
part 225 to read as follows:
PART 225--CREDIT ENHANCEMENT FOR CHARTER SCHOOL FACILITIES PROGRAM
Subpart A--General
Sec.
225.1 What is the Credit Enhancement for Charter School Facilities
Program?
225.2 Who is eligible to receive a grant?
225.3 What regulations apply to the Credit Enhancement for Charter
School Facilities Program?
225.4 What definitions apply to the Credit Enhancement for Charter
School Facilities Program?
Subpart B--How Does the Secretary Award a Grant?
225.10 How does the Secretary evaluate an application?
225.11 What selection criteria does the Secretary use in evaluating
an application for a Credit Enhancement for Charter Schools
Facilities grant?
225.12 What funding priority may the Secretary use in making a grant
award?
Subpart C--What Conditions Must Be Met by a Grantee?
225.20 When may a grantee draw down funds?
225.21 What are some examples of impermissible uses of reserve
account funds?
Authority: 20 U.S.C. 7223, unless otherwise noted.
Subpart A--General
Sec. 225.1 What is the Credit Enhancement for Charter School
Facilities Program?
(a) The Credit Enhancement for Charter School Facilities Program
provides grants to eligible entities to assist charter schools in
obtaining facilities.
(b) Grantees use these grants to do the following:
(1) Assist charter schools in obtaining loans, bonds, and other
debt instruments for the purpose of obtaining facilities.
(2) Assist charter schools in obtaining leases of facilities.
(c) Grantees may demonstrate innovative credit enhancement
initiatives while meeting the program purposes under paragraph (b) of
this section.
(d) For the purposes of these regulations, the Credit Enhancement
for Charter School Facilities Program includes grants made under the
Charter School Facilities Financing Demonstration Grant Program.
(Authority: 20 U.S.C. 7223)
Sec. 225.2 Who is eligible to receive a grant?
The following are eligible to receive a grant under this part:
(a) A public entity, such as a State or local governmental entity;
(b) A private nonprofit entity; or
(c) A consortium of entities described in paragraphs (a) and (b) of
this section.
(Authority: 20 U.S.C. 7223a; 7223i(2))
Sec. 225.3 What regulations apply to the Credit Enhancement for
Charter School Facilities Program?
The following regulations apply to the Credit Enhancement for
Charter School Facilities Program:
(a) The Education Department General Administrative Regulations
(EDGAR) as follows:
(1) 34 CFR part 74 (Administration of Grants and Agreements with
Institutions of Higher Education, Hospitals, and other Non-Profit
Organizations).
(2) 34 CFR part 75 (Direct Grant Programs).
(3) 34 CFR part 77 (Definitions that Apply to Department
Regulations).
(4) 34 CFR part 79 (Intergovernmental Review of Department of
Education Programs and Activities).
(5) 34 CFR part 80 (Uniform Administrative Requirements for Grants
and Cooperative Agreements to State and Local Governments).
(6) 34 CFR part 81 (General Educational Provisions Act--
Enforcement).
(7) 34 CFR part 82 (New Restrictions on Lobbying).
(8) 34 CFR part 84 (Governmentwide Requirements for Drug-Free
Workplace (Grants)).
(9) 34 CFR part 85 (Governmentwide Debarment and Suspension
(Nonprocurement)).
(b) The regulations in this part 225.
(Authority: 20 U.S.C. 1221e-3; 1232)
Sec. 225.4 What definitions apply to the Credit Enhancement for
Charter School Facilities Program?
(a) Definitions in the Act. The following term used in this part is
defined in section 5210 of the Elementary and Secondary Education Act
of 1965, as amended by the No Child Left Behind Act of 2001: Charter
school.
(b) Definitions in EDGAR. The following terms used in this part are
defined in 34 CFR 77.1: Acquisition, Applicant, Application, Award,
Department, EDGAR, Facilities, Grant, Grantee, Nonprofit, Private,
Project, Public, and Secretary.
(Authority: 20 U.S.C. 7221(i)(1); 7223d)
Subpart B--How Does the Secretary Award a Grant?
Sec. 225.10 How does the Secretary evaluate an application?
(a) The Secretary evaluates an application on the basis of the
criteria in Sec. 225.11.
(b) The Secretary awards up to 100 points for these criteria.
(c) The maximum possible score for each criterion is indicated in
parentheses.
(Authority: 20 U.S.C. 7223; 1232)
Sec. 225.11 What selection criteria does the Secretary use in
evaluating an application for a Credit Enhancement for Charter School
Facilities grant?
The Secretary uses the following criteria to evaluate an
application for a Credit Enhancement for Charter School Facilities
grant:
(a) Quality of project design and significance. (35 points) In
determining the quality of project design and significance, the
Secretary considers--
(1) The extent to which the grant proposal would provide financing
to
[[Page 62012]]
charter schools at better rates and terms than they can receive absent
assistance through the program;
(2) The extent to which the project goals, objectives, and timeline
are clearly specified, measurable, and appropriate for the purpose of
the program;
(3) The extent to which the project implementation plan and
activities, including the partnerships established, are likely to
achieve measurable objectives that further the purposes of the program;
(4) The extent to which the project is likely to produce results
that are replicable;
(5) The extent to which the project will use appropriate criteria
for selecting charter schools for assistance and for determining the
type and amount of assistance to be given;
(6) The extent to which the proposed activities will leverage the
private or public sector funding and increase the number and variety of
charter schools assisted in meeting their facilities needs absent the
program;
(7) The extent to which the project will serve charter schools in
States with strong charter laws, consistent with the criteria for such
laws in section 5202(e)(3) of the Elementary and Secondary Education
Act of 1965; and
(8) The extent to which the requested grant amount and the project
costs are reasonable in relation to the objectives, design, and
potential significance of the project.
(b) Quality of project services. (15 points) In determining the
quality of the project services, the Secretary considers--
(1) The extent to which the services to be provided by the project
reflect the identified needs of the charter schools to be served;
(2) The extent to which charter schools and chartering agencies
were involved in the design of, and demonstrate support for, the
project;
(3) The extent to which the technical assistance and other services
to be provided by the proposed grant project involve the use of cost-
effective strategies for increasing charter schools' access to
facilities financing, including the reasonableness of fees and lending
terms; and
(4) The extent to which the services to be provided by the proposed
grant project are focused on assisting charter schools with a
likelihood of success and the greatest demonstrated need for assistance
under the program.
(c) Capacity. (35 points) In determining an applicant's business
and organizational capacity to carry out the project, the Secretary
considers--
(1) The amount and quality of experience of the applicant in
carrying out the activities it proposes to undertake in its
application, such as enhancing the credit on debt issuances,
guaranteeing leases, and facilitating financing;
(2) The applicant's financial stability;
(3) The ability of the applicant to protect against unwarranted
risk in its loan underwriting, portfolio monitoring, and financial
management;
(4) The applicant's expertise in education to evaluate the
likelihood of success of a charter school;
(5) The ability of the applicant to prevent conflicts of interest,
including conflicts of interest by employees and members of the board
of directors in a decision-making role;
(6) If the applicant has co-applicants (consortium members),
partners or other grant project participants, the specific resources to
be contributed by each co-applicant (consortium member), partner, or
other grant project participant to the implementation and success of
the grant project;
(7) For State governmental entities, the extent to which steps have
been or will be taken to ensure charter schools within the State
receive the funding needed to obtain adequate facilities; and
(8) For previous grantees under the charter school facilities
programs, their performance in implementing these grants.
(d) Quality of project personnel. (15 points) In determining the
quality of project personnel, the Secretary considers--
(1) The qualifications of project personnel, including relevant
training and experience, of the project manager and other members of
the project team, including consultants or subcontractors; and
(2) The staffing plan for the grant project.
(Authority: 20 U.S.C. 7223; 1232)
Sec. 225.12 What funding priority may the Secretary use in making a
grant award?
(a) The Secretary may award up to 15 additional points under a
competitive priority regarding the capacity of charter schools to offer
public school choice in those communities with the greatest need for
this choice based on--
(1) The extent to which the applicant would target services to
geographic areas in which a large proportion or number of public
schools have been identified for improvement, corrective action, or
restructuring under Title I of the Elementary and Secondary Education
Act of 1965, as amended by the No Child Left Behind Act of 2001;
(2) The extent to which the applicant would target services to
geographic areas in which a large proportion of students perform below
proficient on State academic assessments; and
(3) The extent to which the applicant would target services to
communities with large proportions of students from low-income
families.
(b) The Secretary may elect to--
(1) Use this competitive priority only in certain years; and
(2) Consider the points awarded under this priority only for
proposals that exhibit sufficient quality to warrant funding under the
selection criteria in Sec. 225.11.
(Authority: 20 U.S.C. 7223; 1232)
Subpart C--What Conditions Must Be Met by a Grantee?
Sec. 225.20 When may a grantee draw down funds?
(a) A grantee may draw down funds after it has signed a performance
agreement acceptable to the Department of Education and the grantee.
(b) A grantee may draw down and spend a limited amount of funds
prior to reaching an acceptable performance agreement provided that the
grantee requests to draw down and spend a specific amount of funds and
the Department of Education approves the request in writing.
(Authority: 20 U.S.C. 7223d)
Sec. 225.21 What are some examples of impermissible uses of reserve
account funds?
(a) Grantees must not use reserve account funds to--
(1) Directly pay for a charter school's construction, renovation,
repair, or acquisition; or
(2) Provide a down payment on facilities in order to secure loans
for charter schools. A grantee may, however, use funds to guarantee a
loan for the portion of the loan that would otherwise have to be funded
with a down payment.
(b) In the event of a default of payment by a charter school whose
loan or lease is guaranteed by reserve account funds, a grantee may use
these funds to cover defaulted payments that are referenced under
paragraph (a)(1) of this section.
(Authority: 20 U.S.C. 7223d)
[FR Doc. 04-23746 Filed 10-21-04; 8:45 am]
BILLING CODE 4000-01-P